Correlation Between Radcom and Catalyst Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Radcom and Catalyst Pharmaceuticals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Radcom and Catalyst Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Radcom and Catalyst Pharmaceuticals, you can compare the effects of market volatilities on Radcom and Catalyst Pharmaceuticals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Radcom with a short position of Catalyst Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radcom and Catalyst Pharmaceuticals.

Diversification Opportunities for Radcom and Catalyst Pharmaceuticals

0.09

Correlation Coefficient

Radcom  Catalyst Pharmaceuticals

Significant diversification

The 3 months correlation between Radcom and Catalyst is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and Radcom is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Radcom are associated (or correlated) with Catalyst Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Pharmaceuticals has no effect on the direction of Radcom i.e., Radcom and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between Radcom and Catalyst Pharmaceuticals

Given the investment horizon of 90 days Radcom is expected to generate 1.12 times more return on investment than Catalyst Pharmaceuticals. However, Radcom is 1.12 times more volatile than Catalyst Pharmaceuticals. It trades about 0.08 of its potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about 0.08 per unit of risk. If you would invest  1,062  in Radcom on October 11, 2024 and sell it today you would earn a total of  149.00  from holding Radcom or generate 14.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Radcom  vs.  Catalyst Pharmaceuticals

Radcom

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Catalyst Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Radcom and Catalyst Pharmaceuticals

The main advantage of trading using opposite Radcom and Catalyst Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radcom position performs unexpectedly, Catalyst Pharmaceuticals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Catalyst Pharmaceuticals will offset losses from the drop in Catalyst Pharmaceuticals' long position.

The idea behind Radcom and Catalyst Pharmaceuticals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.